Britain will announce this week a $1.57 billion (1.24 billion euro) contract to build reactors for its next generation of nuclear submarines, the defence minister said today.

Defence Secretary Philip Hammond confirmed he would be unveiling a deal for engines for a new class of submarines that would replace the current Vanguard fleet carrying Trident nuclear missiles.

The decision could cause a new rift in Britain's coalition government, with Prime Minister David Cameron's Conservatives in favour of keeping Trident but the Liberal Democrats wanting a cheaper alternative.

"What we're going to be announcing is a commitment to the major refurbishment of the plant at Rolls-Royce in Derby which builds these core reactors, not just for the nuclear deterrent submarines but also for our attack submarines, the Astute class submarines," Hammond told the BBC.

"So this is sustaining a sovereign capability in the UK and some very high-end technical skills in the UK for the next 40 or 50 years." A British government source said Hammond would make the announcement on Monday.

The Sunday Telgraph newspaper said the Ministry of Defence (MoD) would fund an 11-year refit of a Rolls-Royce plant that would build two reactor cores, one for the Royal Navy's seventh Astute submarine and the second for a new ballistic missile sub.

Britain has four Vanguard-class submarines designed to carry Trident nuclear missiles. They are expected to be decommissioned in the late 2020s but their missiles will remain operational until 2042.

Hammond last month awarded contracts worth £350 million to British companies to design the next generation submarines, although the final decision on replacements and their numbers will not be taken before 2016.

"We're committed to maintaining a credible nuclear deterrent, and we are placing orders now... for the long lead items that will be necessary to deliver a successor to the Vanguard class submarines in the late 2020s," he said.

"But the actual decision to go ahead and build them won't have to be taken until 2016, and what we're doing at the moment is ordering the things that have to be ordered now to give us that option."

Hammond said a review found that Trident was the "best value solution." The government has made sweeping defence cuts as part of austerity measures aimed at cutting a record deficit.

The Liberal Democrats want to abandon the so-called "Moscow criterion", which says Britain should have an arsenal capable of destroying the Russian capital, saying it is an expensive relic of the Cold War.